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Dividends are a good thing, right?
Yes and no. A dividend is a profit the company is passing to shareholders. It's generally good to invest in companies that turn a profit (and sometimes good to invest in companies that don't turn a profit...)
The problem is that a dividend causes a tax drag. Specifically in taxable accounts.
A dividend is a taxable event in the eyes of the IRS. Every year a dividend comes and is reinvested, that tax can no longer compound for your future.
Over time, the taxation of dividends is a tax on your future.
Now, we don't have an issue with dividends if they are in tax-protected accounts. Only when they are in taxable or non-qualified accounts.
Dividend tax drag is a cost that is often overlooked by retirees. But as we show in this video, it is a cost that cannot be forgotten if you're interested in building a better plan.
#Dividends #RetirementIncomePlanning #TaxEfficientInvesting
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Always remember, "You Don't Need More Money; You Need a Better Plan"
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